Venezuela Inflation Rates

[lowtek]

So I seen this earlier...

View attachment 21019

This is how much money you would need to Venezuela to buy that chicken.

14m bolivars for a chicken: Venezuela hyperinflation explained

So I went and punched that into a historical calculator and seen that in 2008 that same amount of money was worth 6.8 million USD.

View attachment 21020

Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

It gets out of control through government intervention in the free market. Everybody knows the government shouldn't set the price of goods, but somehow the price money (i.e. interest rates) is an exception. These same people get surprised when this results in gross distortions and catastrophes (i.e. building millions of excess homes and then a collapse in the housing market).

Essentially the Venezuelan government tried to print their way out of a mess. They had taken ownership of the oil industry, and ran it into the ground. With oil being their only national asset, when the price of oil tanked, so did their economy. They still owe debts, so they do what all banana republics do - inflate the money supply. This increases the velocity of money (people don't want to hold it because it's devaluing so rapidly) and exerts upward pressure on prices. This results in price inflation, and the billion dollar chicken.

The way it plays out on a persons' wealth is devastating. They ate their pets a couple years ago, seriously, and now people are fleeing en masse to Colombia. It's a complete disaster and the only way out is to replace their socialist government with a more capitalist one. It's no coincidence that Chile is thriving while Venezuela is a complete disaster.

 

[Longinus]

 

[GPM]

Stock up on guns, ammo, booze, silver and gold. Keep your pulse on the government and what they are doing. Unless you are in a coma their are probably some signs to watch out for before it takes a wheelbarrow full of cash in order to buy anything.

My desk has 3 bills in a frame on it. A 100 trillion, 50 trillion, a 1 dollar note from Zimbabwe. It is literally just paper printed by a government. The only reason that paper is worth anything is because people have faith in their government. If people start to lose faith in their government on a massive scale, then why do they believe that these colorful pieces of paper will be worth anything?

 

[Fox]

So I seen this earlier...



This is how much money you would need to Venezuela to buy that chicken.

14m bolivars for a chicken: Venezuela hyperinflation explained

So I went and punched that into a historical calculator and seen that in 2008 that same amount of money was worth 6.8 million USD.



Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

 

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[lowtek]

Well, socialist Norway has budget surplus and negative government debt, it has more assets in the sovereign wealth fund than in debt liabilities, so could cancel all their debts without printing a single Krona.

Venezuela's third way was modelled after Norway so it's almost a textbook study



No Bitcoin is technically inflationary,)currently at 3.87% but the fixed supply and further progression means it's way worse than just adopting say the euro or dollar. Plus it's far too volatile, slow to confirm and requires oodles of electricity. That said the fact that it started out at a higher inflationary rate than the Bolivar is close to the ideal rate of 2% and the rate is simply a function of block difficulty (Dodge Coin has a totally different inflation rate) you can start to see the reason for the Venezulan Goverment's interest. A large denomination is just fine, if it can be stabilised, one can just redomniate the notes. Crypto is good as that, but it has the volatility which needs government fiat to overcome.

I was wondering when someone would show up with this propaganda nonsense.

Norway isn't socialist by any stretch of the word. It's a strong capitalist market with a large government player subsidized by huge individual income taxes. They have fewer regulations and lower business taxes than we do here in the States.

 

[ChrisR]

But... But... Socialism works...

 

[Fpm9]

Communism works : the government made everyone in the country a millionaire!

 

[lowtek]

How could someone mitigate the risk of having their net-worth destroyed by their print happy government? The only way I see is to have investments from markets all over the world so if one shits the bed like in Venezuela, you won't see the value of your money fade away.

Sure, being invested in foreign markets would hedge your risk if you were a citizen of a non western nation.

For us in the United States or Europe, if we were facing such a collapse, it's game over. If the USD falls, the rest of the world goes with it. There's nowhere to run, in terms of the financial markets. I suppose gold would be your best bet for wealth preservation, but your net worth is the least of your concerns when there is literally no food to purchase.

 

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[Raoul Duke]

So I seen this earlier...

View attachment 21019

This is how much money you would need to Venezuela to buy that chicken.

14m bolivars for a chicken: Venezuela hyperinflation explained

So I went and punched that into a historical calculator and seen that in 2008 that same amount of money was worth 6.8 million USD.

View attachment 21020

Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

 

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[MidwestLandlord]

Can someone explain how it would get so far out of control and how this actually plays out with a persons actual wealth?

I promise not to mention socialism lol.

1) more money is created through government debt or consumer/commercial debt*

2) more money in circulation (money that can be spent), leads to increase in demand for goods and services

3) supply of goods and services remains the same or drops

4) basic law of supply and demand: If demand is up, and supply remains the same or drops, prices tend to rise

5) increase in demand hits highly elastic markets the hardest and fastest (real estate is a non-elastic market, automobiles are a high-elastic market. Elastic = how quickly the market prices react to changes in supply and demand)

6) rising prices causes the government to print more money to make it's payments

7) more money causes even greater demand

8) greater demand causes ever rising prices

9) rising prices causes people/businesses to spend money more quickly, to avoid paying more tomorrow

Edit to be more clear: as demand increases, and prices rise, at some point supply will drop as manufacturers and such start having trouble making their own payments. Basic law of supply and demand: If supply drops, but demand stays the same or rises, prices tend to rise. So...as inflation takes off, and demand is high, we get the double-whammy of supply dropping, which only helps to accelerate rising prices, i.e inflation.

10) faster spending = more money available = increasing demand = rising prices

11) rising prices = can buy less with the same money = inflation.

Add irrational government policies into the mix, and yeah...hyper-inflation.

Effects on your assets? See step #9 above. Buy today, or spend way more tomorrow (which is a reduction in the spending power of your money)

Cash

At the current rate of inflation in Venezuela, a $1 item today will cost $10,000 in a year.

So $1,000,000 a year from now, would have the same buying power as $100 today.

Precious Metals

Theoretically, $100 in gold would be worth $1,000,000 (of useless money though)

Real Estate

Theoretically, every $100 in real estate would be worth $1,000,000 (of useless money...again)

Notes/Debt

Principal on debt doesn't rise with inflation. If someone owes $100,000 on a house, and suddenly they are getting paid $1,000 an hour because inflation, debt becomes worthless FAST.

Good if you owe the money (except a loaf of bread costs $10,000), but bad for the entity holding the note.

Suddenly the government is bailing out banks that are insolvent by printing more money....

Now apply this to all forms of credit. Credit cards, NET invoices, homes, cars, etc.

AND, here's the big one, apply this to items paid in arrears, paid in advance, or under contract. Water bill, insurance, property tax, vehicle registration, cable bill, cellphone, etc

Now utility companies, municipalities, cellphone service providers, and insurance companies are insolvent because their revenue doesn't quickly adjust for inflation (non-elastic)

I could go on...

*commercial lending increases money supply by creating additional demand deposits.

I borrow $100,000 to buy a house. The bank pays the seller that $100,000

The seller later deposits that $100,000 into his bank.

$100,000 debt
+$100,000 deposit
--------------------------
= $200,000

 

[c4n]

Apparently I don't know how to post an image link, so I have no idea if this will work or not

 

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[GoGetter24]

Just remember folks: socialism works, until it doesn't work and it's capitalism's fault.

That's literally what Chomsky said after Venezuela collapsed, "it was due to too much capitalism", after lauding their socialist model and being best buddies with Chavez. The guy is a walking caricature. Academic scum.

I had another buddy from back at university who was all on that bandwagon. About Chavez being some kind of socialist hero, standing up to the US. And yet Venezuela, the most oil rich country in the whole region is now a collapsed hellhole. I bet if I still had contact with him, he'd say the same "wasn't socialism's fault" thing. Incidentally he stayed in academia too. Academic scum.

Wouldn't Bitcoin solve these problems?

Sure, if you're "rich" enough to afford a computer and electricity.

Oh and also the 6 month training course to learn what they actually are and how to use them.

Gold & silver were always the solution: for the citizens. Not for the government. You think the government considers this a problem? They get to print that money and use it first. They don't suffer inflation, until people stop accepting anything but USD as payment.

But then they have a traditional government solution: stick a gun in their face.

 

[Xeon]

Does anyone here have manufacturers or have dealings in Venezuela? I was wondering if their manufacturers (in general) there will be even cheaper than the Chinese factories, and it's even faster and cheaper to ship from Venezuela to the US.

Not sure what is their highest performing industries/exports though.

 

[Roli]

Sure they don't own all the means of production but even going by your definition rather than the dictionary one they own it in some areas and even have an exclusive monopoly in the first example, it is illegal to compete with poker. How is that not socialist?

I wouldn't bother getting into this, socialism means something else in the US. Because of decades of propaganda they don't understand that it is possible to be capitalist and socialist at the same time. Hence the fastest way to lose an election in the States is to be labelled a socialist (filthy commie).

On another very sad note, in Venezuela the price of condoms has gone up so much that they can no longer be afforded by most people, or given out by sexual health clinics.

This has led to a whole swathe of young women sterilising themselves, because they can not afford to feed any babies they may have.

The knock on effects from this could last decades, from population shrinkage to STDs.

Chavez fooled the world about his efficacy, however it did seem that he was somehow holding the place together. I hope they can come back from this, though at the moment it's hard to see how.

 

[AgainstAllOdds]

I was enjoying this thread for a bit.

 

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[AFMKelvin]

Just remember folks: socialism works, until it doesn't work and it's capitalism's fault.

That's literally what Chomsky said after Venezuela collapsed, "it was due to too much capitalism", after lauding their socialist model and being best buddies with Chavez. The guy is a walking caricature. Academic scum.

I had another buddy from back at university who was all on that bandwagon. About Chavez being some kind of socialist hero, standing up to the US. And yet Venezuela, the most oil rich country in the whole region is now a collapsed hellhole. I bet if I still had contact with him, he'd say the same "wasn't socialism's fault" thing. Incidentally he stayed in academia too. Academic scum.


Sure, if you're "rich" enough to afford a computer and electricity.

Oh and also the 6 month training course to learn what they actually are and how to use them.

Gold & silver were always the solution: for the citizens. Not for the government. You think the government considers this a problem? They get to print that money and use it first. They don't suffer inflation, until people stop accepting anything but USD as payment.

But then they have a traditional government solution: stick a gun in their face.

wrt Venezuela and Turkey:

Wouldn't Bitcoin solve these problems? Its max supply is 21 million units, but it will never reach that because people lose their coins. No one can print off more Bitcoins at a whim because they want to, at least not faster than the total hashing ability that the mining network will allow. Bitcoin can also transcend countries. One single Bitcoin alone can power the economies of the entire world.

Ever heard of internet cafes? You don't need a computer and electricity inside your house to buy Bitcoin. There's also local bitcoins to buy locally.

And what are you talking about when you say you need a 6 month training course? You can literally buy Bitcoin and use it in less than an hour. I don't think you know what you're talking about about.

And to answer the original question yes Bitcoin has solved the problem for the ones that knew about it. Venezuela was one of the reasons why Bitcoin skyrocketed to 20k last year. Even regular folks were buying bitcoins in paper wallets with Pepe the Frog on it to throw off the police who tried to confiscate their possessions.

 

[Agbaya]

The way it plays out on a persons' wealth is devastating. They ate their pets a couple years ago, seriously, and now people are fleeing en masse to Colombia. It's a complete disaster and the only way out is to replace their socialist government with a more capitalist one. It's no coincidence that Chile is thriving while Venezuela is a complete disaster.

How could someone mitigate the risk of having their net-worth destroyed by their print happy government? The only way I see is to have investments from markets all over the world so if one shits the bed like in Venezuela, you won't see the value of your money fade away.

 

[ygtrhos]

I am Turkish and Turkey has been dealing with hyperinflation since 70s. Even in the boom years, double-digit inflation was a daily reality in Turkey. I can totally follow the Venezuelan thing.

It is expected that the inflation in lira next year is 30-40%. The ones who are screwed are the people with salaries: pensioners, workers (private or government). The ones who profited huge are exporters and the ones who got bankrupt are importers.

We are going to see a lot of inflation in emerging markets, because it is going to be difficult in emerging markets to return the debt in dollars, where there is not much money around anymore, set free by low-interest rate politics in USA (and soon EU as well). Turkey is an extreme example, but Iran is going through a similar process for example.

Times are going to be tough and the ones who adapt to the new economy will survive.

 

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[ChrisR]

I was wondering when someone would show up with this propaganda nonsense.

Haha! It was only a matter of time.

Well, socialist Norway has budget surplus and negative government debt, it has more assets in the sovereign wealth fund than in debt liabilities, so could cancel all their debts without printing a single Krona.

Venezuela's third way was modelled after Norway so it's almost a textbook study

@lowtek is right. Norway isn't a socialist country. Until these "socialist" countries nationalize their means of production they aren't socialist. They're capitalist countries with socialist programs.

 

[GoGetter24]

Norway isn't socialist by any stretch of the word

And even if they were, hard for any form of government to screw up when you're an ancient country with only 5 million people and bountiful seas of oil.

 

[GoGetter24]

I don't think you know what you're talking about about.

How to guess what percentage of someone's assets are invested in crypto: see how vigorously they claim you "don't know what you're talking about" when you point out nobody actually uses the stuff for day to day transactions.

"I'd like that bread please"
"OK that'll be 100 bolivars"
"Cool, give me your bitcoin address, and I'll go find an internet cafe, and then I'll come back for the bread when the transaction is confirmed".

Dat true believerism.

 

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[PedroG]

I was wondering when someone would show up with this propaganda nonsense.

Norway isn't socialist by any stretch of the word. It's a strong capitalist market with a large government player subsidized by huge individual income taxes. They have fewer regulations and lower business taxes than we do here in the States.

Yeah, all of a sudden people want to re-define socialism to mean any high tax country, so they can pick any country they want as an example.

 

[lewj24]

If there would be less money but more wealth, money would have more value in time, right?

So all you have to do is to keep all the money you have under your pillow and it will raise in value. So money will become scarce. Is this really an advantage?

Money would definitely have more value in time compared to the inflation we currently have every year. There used to be periods of inflation and deflation. Now we only have inflation.

Saying money would become scarce is a misunderstanding. There's always bills. Rent, food, kids, cars, etc. People will also always spend extra money on luxury, things like TV's, Computers, Clothes, etc. And for those who want to save money they would put it in the bank to earn interest and when money is in the bank the bank takes your money and puts it back into circulation through investments.

Few people would bury all of there money and take it completely out of circulation. I would say that the people who do do that don't have enough money for that to have any impact.

 

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[Roli]

This makes no sense. So does more money = more wealth? Obviously not. Look at the Zimbabwe trillion dollars on the first page of this thread. They aren't richer because of more money.

I didn't think I'd have to put the obvious caveat there of; inflation notwithstanding.

Hence there being X (can't be bothered to look it up) millionaires in 1950 and X plus whatever by 1980. The reason being more people able to get finance = more people buying stuff = more people selling stuff = more wealth

Not at all. The gold standard was created by people. Not the Fed. .

It was actually created by money lenders, early forms of banks. However the point is moot because I never suggested it was created by the Fed. I stated that it represented an agreement between the Fed (along with all national banks of countries that were on the gold standard,) and the rest of the highstreet/merchant banks et al. Which is a 100% true statement.

I feel we've come as far as we can in this little exchange.

 

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[W. Sabria]

given Venezuela wanted to be Norway and ended up like Venezuela

Wow. What a clown, this guy. I've been listening to your rants throughout this thread and it's one IBS discharge after another.

The Venezuelan economy is in freefall as a direct result of the criminal enterprise that is running the country. Maduro's (and his cronies) narco-government has stolen basic human rights, property (and even food) from its people; silencing independent media outlets and incarcerating opposition leaders. This is not a Scandinavian pet project gone wrong, this is communism at its finest. But to be clear, the record inflation and lack of food and medicine are NOT from mismanagement and government incompetence. It is all part of a despotic plan to run the country to the ground; making the entire population fully-dependent on the government for subsistence and thus rendering complete control in all aspects of everyday life.

It's the Soviet/Cuban model currently being exported throughout the region. Venezuela is already lost. Nicaragua is next.

Viva la revolución, @LittleWolfie. I hear Caracas is beautiful this time of year.
Send us a postcard.

 

[Captain_Picard]

wrt Venezuela and Turkey:

Wouldn't Bitcoin solve these problems? Its max supply is 21 million units, but it will never reach that because people lose their coins. No one can print off more Bitcoins at a whim because they want to, at least not faster than the total hashing ability that the mining network will allow. Bitcoin can also transcend countries. One single Bitcoin alone can power the economies of the entire world.

 

[Brad S]

Anyone have any thoughts on whether the original bolivar will ever regain some of its value?

I bought some awhile back very cheaply on the off chance it would ever rebound with the "reversion to mean" law.

Sent from my SM-G950U using Tapatalk

 

[happybhoy]

People are struggling to buy fuel because the lowest denomination is far,far higher than the cost.

 

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[GoGetter24]

Haha! It was only a matter of time.

Yeah and how surprised I am I had to click "show content from ignored member" to find out who it was.

And low and behold it's our resident pathetic whimpering troll: LittleWolfie. How the eff he's still allowed to stay here and poison this well is beyond me.

Hopefully his government conscripts him and hammers his wet lettuce self into at least 10% of a solid upstanding grown-up man.

 

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[LittleWolfie]

What problems do people have with Crypto? Solve

I was wondering when someone would show up with this propaganda nonsense.

Norway isn't socialist by any stretch of the word.

there's no stretching it fits literally the first definition in the dictionary (of course so does the USA) the closest non socialist example I can think of is lazzie fare capitalism during the early British empire/industrial revolution.


I've added the definition below for clarity.

. It's a strong capitalist market with a large government player subsidized by huge individual income taxes. They have fewer regulations and lower business taxes than we do here in the States.

One can be both capitalist and socialist, in fact that was a major point socialism and capitalism as a bulwark against communism for the average man while retaining most of the advantages of capitalism.

Haha! It was only a matter of time.




@lowtek is right. Norway isn't a socialist country. Until these "socialist" countries nationalize their means of production they aren't socialist. They're capitalist countries with socialist programs.

Haha! It was only a matter of time.




@lowtek is right. Norway isn't a socialist country. Until these "socialist" countries nationalize their means of production they aren't socialist. They're capitalist countries with socialist programs.

The Oxford English Dicitonary gives socialism as 1A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Now how does Norway (or the USA) for that matter not regulate the means of production? True, there's no minimum wage law in Norway, but collective bargaining is community regulation of the means of production, so is health and safety law. Norway is a socialist and a capitalist state with a strong welfare system that's the Nordic model.

Until these "socialist" countries nationalize their means of production they aren't Socialist

Vinmonopolet (English: The Wine Monopoly), symbolized by Ⓥ and colloquially shortened to Polet, is a government-owned alcoholic beverage retailer and the only company allowed to sell beverages containing an alcohol content higher than 4.75% in Norway.[1]

Statskog is a Norwegian state-ownedenterprise responsible for the management of state-owned forest and mountain real estatetotaling approximately 20% of the area of Norway. About 5% of Statskog's land is productive forest while 80% is above the tree line. The company has its headquarters in Namsos.

List of government enterprises of Norway - Wikipedia

Sure they don't own all the means of production but even going by your definition rather than the dictionary one they own it in some areas and even have an exclusive monopoly in the first example, it is illegal to compete with poker. How is that not socialist?

 

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